Just a few days after the Florida Supreme Court ruled the state's common law doesn't provide pre-1972 sound recordings with rights to public performance royalties, the U.S. Court of Appeals for the Ninth Circuit heard oral arguments on whether remasterings inject pre-1972 sound recordings with federal copyright protection.

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Just a few days after the Florida Supreme Court ruled the state’s common law doesn’t provide pre-1972 sound recordings with rights to public performance royalties, the U.S. Court of Appeals for the Ninth Circuit heard oral arguments on whether remasterings inject pre-1972 sound recordings with federal copyright protection.

CBS Corp. is at least one-third of the way back toward trial on whether it owes royalties under California law for streaming pre-1972 recordings over the Internet. During the November oral arguments in ABS Entertainment Inc. v. CBS Corp., 16-55917, Federal Circuit Judge Richard Linn, sitting as a visiting judge for the Ninth Circuit, sounded extremely skeptical of the broadcaster’s defense that the process of digitally remastering hits from the 1960s and 1970s made them derivative works and therefore subject to post-1972 federal copyright law, under which sound recording owners receive no public performance royalties for terrestrial radio broadcasts. (CBS says it paid required royalties for online streaming of post-Feb. 15, 1972, recordings.)

During the arguments, Judge Linn said the remastering process was designed merely to improve sound quality, a perspective at odds with U.S. District Judge Percy Anderson of the Central District of California’s finding that it added creative expression.

“The digital remasters don’t contain any different voices, do they?” Judge Linn asked McKool Smith partner Robert Allen, representing a class of recording artists and their licensees that is suing CBS.

“They do not, your honor,” Allen replied.

“Any different musicians?” Linn asked.

“They do not, your honor,” Allen repeated.

But Ninth Circuit Judges Marsha Berzon and Paul Watford sounded somewhat more open to CBS’s argument. Before Feb. 15, 1972, federal copyright law made no mention of sound recordings. But the California Legislature has granted authors “exclusive ownership” of pre-1972 recordings. Music owners say the legislature was trying to cover the gap in federal law, but the Ninth Circuit has asked the California Supreme Court to clarify.

McKool Smith and Allen, a former legal affairs chief for Universal Music Publishing Group, represents a class that holds recording copyrights in the music of Al Green, the Everly Brothers, Mahalia Jackson and others. “When Al Green and his band went into the studio and recorded their vocal and instrumental performances, that was the date that sounds were initially fixed in a tangible medium,” Allen told the Ninth Circuit. The fact that sound engineers may have later optimized them for digital transmission didn’t create new derivative works, he argued.

Circuit Judge Berzon didn’t sound fully convinced. “My understanding is that the sound recording is not the act of recording, it’s the fixing on a tangible medium,” she said. “The other way of looking at it would be that there’s at least a factual dispute that there was a derivative work here.”

Circuit Judge Watford implied that it might be premature for the Ninth Circuit to decide, given the California Supreme Court hasn’t decided yet whether or how state copyright applies.

Robert Schwartz, the Irell & Manella partner who masterminded the defense for CBS, said engineers spend weeks and even months creating a new aesthetic when remastering recordings. That lets the music owners market it as: “If you want to hear the Everly Brothers as you’ve never heard them before, you need to buy this new remaster.”

“But it’s the same recording,” Judge Linn told him.

“It’s not the same recording,” Schwartz replied. “It is the same studio performance.” But the engineer may say, “I want them to hear the bass line more. Or I want them to hear the background singers more.”

That, Schwartz said, “is creative expression … sufficient to create a new work that is subject to copyright.”

By the end of the oral arguments, Judges Watford and Berzon were triangulating toward Allen and the music owners’ alternative argument: that if the remastered recordings are derivative works after 1972, they’re covered by both state and federal copyright law.

“Why in the world would Congress have intended this regime to come into being?” Judge Watford asked him. “I have to say I agree with CBS, it doesn’t make a whole lot of sense.”

Florida Rules Against Flo & Eddie

Meanwhile, the Florida Supreme Court ruled against Flo & Eddie Inc., the company created by the lead singers of the 1960s hits group The Turtles, by finding that Florida common law does not recognize an exclusive right of public performance in pre-1972 sound recordings. Flo & Eddie Inc. v. Sirius XM Radio Inc., SC16-1161. That means Sirius XM Radio was not skirting state law when it streamed Turtles recordings online without paying royalties to Flo & Eddie.

“Flo & Eddie essentially asks this court to recognize an unworkable common law right in pre-1972 sound recordings that is broader than any right ever previously recognized in any sound recording,” Supreme Court Justice Charles Canady wrote in a unanimous opinion. “Doing so would require this court to, among other things, ignore the lengthy and well-documented history of this topic — something we decline to do.”

Sirius XM previously settled with Flo & Eddie, which filed class actions in Florida, New York and California on behalf of owners of pre-1972 sound recordings. A settlement approved by a California federal judge in May put Sirius XM on the hook for at least $25 million in payments to the class as well as a 10-year license.

The question Flo & Eddie raised came before the Florida Supreme Court from a federal case in Miami in which U.S. District Judge Darrin Gayles in Miami initially ruled for Sirius XM, but the U.S. Court of Appeals for the Eleventh Circuit asked for clarification on Florida law from the state’s justices because there was no case law that directly addressed the issue.

The Florida Supreme Court examined the history of copyright law, which has long required broadcasters to license songs from the owner of a musical composition, usually the songwriter or publisher. In 1995, for digital transmissions of sound recordings the federal law began requiring companies like Sirius XM to obtain a license from the owner of the song recording — the performer or the record company — but only for post-Feb. 15, 1972, song recordings.

The state supreme court disagreed with Flo & Eddie’s reliance on a 1943 Florida case involving one magician suing another for copying his public performance. The justices found the case concluded that a dramatic composition or intellectual production that is not covered by federal copyright law loses any exclusive right of public performance the moment it’s published. “Florida common law has never previously recognized an exclusive right of public performance for sound recordings,” Justice Canady wrote. “To recognize such a right for the first time today would be an inherently legislative task. Such a decision would have an immediate impact on consumers beyond Florida’s borders and would affect numerous stakeholders who are not parties to this suit.”

Both sides to the suit had lawyers who once sat on the Third District Court of Appeal: former Judge David Gersten, now with Gordon Rees Scully Mansukhani in Miami, representing Sirius XM, and former Judge Angel Cortiñas of Gunster in Miami representing Flo & Eddie.

***** Scott Graham writes about intellectual property and the U.S. Court of Appeals for the Federal Circuit for ALM. Celia Ampel is a reporter for Daily Business Review, a Florida-based ALM sibling of Entertainment Law & Finance.

The views expressed in the article are those of the authors and not necessarily the views of their clients or other attorneys in their firm.

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